U.S. tightens sanctions on Iranian economy

President Barack Obama in Washington on Nov. 21. REUTERS/Kevin Lamarque

With new measures tightening sanctions on Iran, the United States moved one step further toward effectively cutting off the Islamic Republic’s economy from the West.

President Obama issued the measures Monday in the form of an executive order.

At a news conference the same day, Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner said that the U.S. government would treat Iran’s banks as a “threat to government institutions.” The step, Geithner said, means that any financial institution has effectively been warned: “You are at risk of supporting Iran’s nuclear activities” as well as its backing for terrorists.

The announcement comes in the wake of a recent report from the International Atomic Energy Agency that determined there is “credible” evidence that Iran is pursuing a nuclear weapons capability.

Without explicit penalties for dealings with Iran’s banks, the Obama administration’s action is just shy of actually sanctioning all the banks, including the Central Bank, which is what Congress and pro-Israel groups have been demanding.

It was not clear yet whether the move would satisfy those demands, led in the U.S. House of Representatives by Rep. Howard Berman (D-Calif.), the senior Democrat on the Foreign Affairs Committee, and in the Senate by Sen. Mark Kirk (R-Ill.).

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Such sanctions would effectively force any entity dealing with Iran to choose between continuing such dealings or being cut off from the U.S. and other Western economies. The likely effect would be Iran’s near-total isolation from the economies of the developed world.

A letter sent to Obama last week, authored by Berman and signed by leaders of both parties in the House, urged the president to sanction the Central Bank of Iran, also known as Bank Markazi.

“If a review of the facts confirms that CBI is involved in illicit activities linked to Iran’s nuclear program and terrorist activities, we urge you to quickly designate CBI as a facilitator of Iran’s weapons of mass destruction proliferation and terrorist activities for the purpose of imposing sanctions on persons that do business with CBI,” the letter said.

Geithner named the Central Bank in his warnings and suggested that the warning—even lacking the formal bite of sanctions—would inhibit Iran’s economy.

“Iran is now cut off from three of the world’s largest financial sectors,” he said, referring to simultaneous actions against Iran announced Monday by Britain and Canada.

France called for outright European Union sanctions on those dealing with the Central Bank and a suspension of all oil purchases from Iran—steps would that go beyond the Obama administration’s warning that dealing with Iran places an individual or an entity “at risk.”

“The idea of freezing the CBI is a huge step and we are aware of that, but we believe it is the appropriate response to such a game change,” a French diplomat told JTA, speaking under his country’s customary rules of anonymity.

European foreign ministers are set to convene in the next two weeks and likely will consider the French call.

The executive order described by Clinton and Geithner also bans dealings with Iran’s energy sector, tightening rules that had only banned investments.

Sources with pro-Israel groups said that the tighter sanctions announced by Clinton and Geithner were unlikely to stop Congress from moving ahead with legislative efforts to sanction the Central Bank, but were likely to head off for now a battle between Congress and the White House over such legislation.

The principal hesitation in cutting off Iran outright is that doing so would drive up the world’s oil prices. That may soon change, insiders said, with Libya’s pending re-entry into oil markets. Libya’s anticipated 1.5 million barrels a day would go some way to compensate for the anticipated 2.5 million barrels a day that Iran’s exit would cost the world supply.

The Anti-Defamation League praised the new measures, saying in a statement that they “mark a welcome and important new stage in the campaign against Iran’s development of a nuclear weapons capability.”

In an interview that aired Sunday on CNN, Israeli Defense Minister Ehud Barak said the “time has come” to deal with the Iranian nuclear program.

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